Eva Case Study of Dabur India Limited Essay

Words: 6758
Pages: 28

Vidyasagar University Journal of Commerce Vol.11, March 2006

Debdas Rakshit*
Traditional measures of corporate performance are many in number. Measures using common bases are Net Profit Margin, Operating Profit Margin, Return on Investment (ROI), Return on Net Worth (RONW), Earning Per Share (EPS) etc. Among these, again ROI is recognized as the most popular yardstick of overall performance. But it is often argued that, in general, these traditional measures fail to identify the true surplus. Economic Value Added (EVA) is advocated as a new measure of corporate performance that focuses on clear surplus in contrast to the traditionally used profit based
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Objectives of the Study This study has the following objectives: 1. To examine whether Dabur India Limited (DIL) has been able to generate value for its shareholders. 2. To compute the performance of the company by applying traditional performance indicator like ROI and the new corporate performance measure EVA.


Vidyasagar University Journal of Commerce

Debdas Rakshit

Database and Methodology The financial data of DIL, selected for this study has been collected from the published Annual Reports for the period 1998-99 to 2002-03. Capitaline-2000 Database Package has also been used for the collection of BSE Sensex and DIL Share Price data. Computation of EVA involves calculation of three figures, (i) Net Operating Profit Before Interest After Tax, (ii) Capital Employed and (iii) Weighted Average Cost of Capital based on CAPM. To compute market return long run averaged annualized daily return has been considered. The long run period should represent all cycles and abnormalities of the capital market. For the purpose of analyzing risk containment measures in Indian stock index futures market, J.R.Varma Committee used data for the period 1st July 1990 to 30th June 1998. The objective of taking a long sample period was to consider two full business cycles that will cover more than two interest rate cycles and two stock market cycles. Prof. Varma deliberated upon the reasons for inclusion of 1992 when index was influenced by the security